Comments 4

Apple is a great company but they’re facing the issue that all great tech companies eventually face… competition. Particularly I’m the hardware/software business. The issue for Apple is that the growth story and stock valuation priced in continued growth in Asia that isn’t occurring. Asia has a fairly saturated smartphone market and companies like Samsung, LG, Lenovo ect. Beat Apple to it. They sell a good product at a lower cost and have more of a brand name in China and India. So what are the odds that Apple cracks that market? Slim.

Apple has them panicked and simply raised ASP’s in order to continue to grow revenue due to their lack of expansion into Asia and the upgrade cycle expanding. But all the price increase is doing is making people hold unto their old iPhones longer. So this will continue to slow Apple unit sells. They’re realizing that if you raise prices, you will sell fewer units, and at some points margins will take a hit as more people stop buying. If Apple believed their own story about being viewed as a services company, they wouldn’t be trying desperately to raise ASP’s. They’d be reducing ASP’s so that they could expand market share and raise services prices. But that’s not happening because they’re not even confident about their own narrative.

What the analysts also fail to mention is the competition from Google. They’re missing that Google is killing Apple expansion due to their business model. Google simply has to create the software, not Hardware for the Android OS. That reduces costs for Hardware makers who want to run the Android OS on their smartphones. So it reduces costs for everyone, which is a luxury that Apple doesn’t have. The recent “Android One” program means that Google is solving the fragmentation issue by getting a bunch of Hardware makers regular Android OS updates making Android a viable platform that can compete with the iOS now. In the past Android devices were fragmented in terms of which software they ran which made Apple more attractive, but when Google created the Pixel, and the Android One program that narrative began to shift. Since Google, Samsung, LG, Lenovo and others aren’t even trying to make a profit on their phones (they just want to get a device in your hands and make profits from other sources) and since they’re taking hardware AND software more seriously now, Apple has serious competition emerging.

In closing, due to the factors I mentioned, Apple will see reduced margins. The only thing Apple can do is drop the price of their phones, expand their market share, and increase margins on services like they say they want to.

It's a pricing issue, they essentially shifted the demand curve left when they decided to charge that high of a price. When I saw their plan to try to charge $1000 for the base model of that phone I knew people wouldn't pay that. The executives at apple are so far disconnected if they believe the average consumer can afford $1k for a phone.